Exit AOL; TBS gets back in the game

Atlanta-based Turner Broadcasting System was engulfed and devoured by Time Warner in the 1990s and folded into the combination of Time Warner and AOL when those two married in 2001.

Now TBS — once the bully pulpit and entrepreneurial launch-pad of charismatic founder and former chairman Ted Turner, who retired in 2006 — has its swagger back.

If Time Warner follows through on a plan to ditch troubled AOL, TBS will suddenly emerge from the relative shadows to become half of Time Warner, at least based on the profits TBS’ cable networks generate.

“This is good news for Turner Broadcasting System, good news for Atlanta,” said Bernstein Research senior analyst Michael Nathanson, who praised the decision, as did Wall Street, which has long tried to prod Time Warner and AOL into divorce court.

Nathanson estimated another 15 percent of Time Warner’s profits will come from HBO, which is not under the Turner umbrella.

Before the AOL spin-off, TBS represents one-third of Time Warner based on profits, said Ed Adler, a spokesman for the New York-based parent company.

The decision to jettison AOL follows the media conglomerate’s March spin-off of its cable division. Together, the moves leave the company devoted to producing news, information and entertainment instead of distributing it on the Internet and cable.

Time Warner Chairman and CEO Jeff Bewkes said Friday that “Turner’s distinctive brands are increasingly central to our future. TBS and TNT’s original programming strategy has paid off in record ratings, and we’re continuing to invest in originals as well as in our journalism for CNN. As viewers and advertisers continue to move away from broadcast, we expect to benefit more than our competitors.”

TBS also produces the cable channels HLN, CNN International, Turner Classic Movies, truTV, Peachtree TV, Cartoon Network, Boomerang and Adult Swim.

About 8,000 of TBS’ 12,000 employees work in Atlanta.

Bank of America Merrill Lynch analyst Jessica Reif Cohen said in a report that “under any scenario,” Time Warner’s cable networks are now the “biggest growth driver” of the company.

She predicted TNT and TBS will continue to shift away from purchased and syndicated content to producing their own shows to close the rate gap between them and the four major broadcast networks — FOX, ABC, NBC, and CBS — which charge about three times as much for ad rates.

That’s one of the missions of TBS chairman and CEO Phil Kent, who said in an interview he thinks he can eventually win that argument with TV advertisers.

“Basically, the bottom line is our entertainment networks are showing programming that is competitive and of equal quality to programming on the broadcast networks,” said Kent, 54.

When Kent took the helm in 2003, there were no original shows produced on TNT and TBS. This year there will be 13, including the hit show “The Closer,” and “Saving Grace,” on TNT, and “Tyler Perry’s House of Payne” on TBS.

Viewers don’t distinguish between cable and broadcast, even if advertisers still do, he said.

“It’s all television. Nobody watching television is thinking about broadcast as opposed to cable.”

Kent met Ted Turner in the early 1990s while Kent was working as an agent at Creative Artists Agency in Los Angeles and Turner was out pitching his then-new cable network, TNT.

“He [Turner] said he was going to produce 48 movies a year, which I thought was wonderfully audacious, but we also thought it was ridiculous,” remembers Kent.

Three years later, Kent found himself working at Turner, where he went through a series of jobs jobs in Turner Home Entertainment, Turner Broadcasting System International, and CNN News Group before leaving in 2001.

“It’s an old story. I really don’t want to get into that too much,” Kent said Friday. “There were some management changes made that I wasn’t happy with.”

He returned to take the top job two years later.

Shedding AOL as a corporate sister won’t change his mission to produce more shows and continue to build audience at CNN, which is getting beat in prime time by Fox News Channel.

Kent said the battle is overblown in the press: “Our competition with Fox is something print journalists focus on. We’re fighting for anybody who wants to watch news, not just Fox.”

Kent said Friday he does not expect many changes at Turner because of corporate realignment.

“We’re just going to operate the company the way we’ve always operated the company,” he said. “Turner Broadcasting will just be a bigger component of the growth.”